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Joseph E. Stiglitz, recipient of the Nobel Memorial Prize in Economic Sciences in 2001 and the John Bates Clark Medal in 1979, is University Professor at Columbia University, Co-Chair of the High-Level Expert Group on the Measurement of Economic Performance and Social Progress at the OECD, and Chief Economist of the Roosevelt Institute. A former senior vice president and chief economist of the World Bank and chair of the US president’s Council of Economic Advisers under Bill Clinton, in 2000 he founded the Initiative for Policy Dialogue, a think tank on international development based at Columbia University. His most recent book is Globalization and Its Discontents Revisited: Anti-Globalization in the Era of Trump.

Prof. Stiglitz really misunderstands Japan, where I live, to say nothing of the damage he does by consistently praising the right-wing revisionist Prime Minister, Abe Shinzo.
1. The opening paragraph makes it sound as if the Japanese government isn’t pursuing growth, but rather is focused on improving standards of living. That is simply false. The Abe government has explicitly targeted GDP growth as a policy goal, with the PM committing to a ¥600 trillion GDP by 2020, to say nothing of a mantra of 3% nominal growth and 2% real growth (i.e., not only high growth but a flip from deflation to inflation). In pursuit of these goals, and with a solid supermajority in the Diet despite his coalition’s winning 40% or less of the vote in each election since 2012, Abe has made Japan an arms dealer for the first time since WWII, and has pushed for the legalization of casinos. He also directly intervened to bring the 2020 Olympics to Tokyo, which has resulted in lucrative deals for construction companies tied to many politicians within his party, even though many Tokyo residents didn’t want the games, and even though the national government that Abe runs didn’t make any commitment to help bear the expense.
2. There isn’t any evidence that Mr Abe is concerned with standards of living of most Japanese. In any case, income inequality has grown under the his administration, so if the goal were as Prof. Stiglitz suggests, Abe has failed.
3. As for reducing consumer taxes, this is of course contrary to all major parties’ long-standing political narrative that consumption tax increases are necessary for funding the country’s public benefits system. Tax increases are unpopular and postponed for as long as possible so as not to dampen GDP growth. Prof. Stiglitz doesn’t address the problem of aging Japan and funding benefits in his piece. Not that he is necessarily wrong on his recommendation, but his argument is entirely out of touch with local thinking, and therefore has zero chance of being heard.
4. The arguments about increasing productivity in services and agriculture are simplistic. There are cultural reasons, and also reasons having to do with the very high quality of Japanese agriculture and many services, why lower productivity and higher quality would really be the best move for Japan. But even assuming for the sake of argument that there would not be a trade-off of quality and productivity, productivity improvements don’t automatically result in improved standards of living. In Japan, as in many Western economies, the gains from productivity improvements increase payouts to shareholders, not wages.
5. As another commenter pointed out several months ago, Abe’s supposed policies to bring more women into the workplace remain empty rhetoric. Nothing has changed. Abe’s words are opportunistic hypocrisy for the sake of appropriating one of the opposition’s issues. But Prof. Stiglitz has shown little interest in Japanese politics, so it’s not surprising he takes Abe at face value on this point.
6. Politically, Mr Abe is a member of the ultra-reactionary Nihon Kaigi, which believes that Japan’s constitution was imposed upon it by a foreign power, and which prefers a return to the Meiji Constitution that was in effect during WWII. Mr Abe also seeks to rehabilitate the reputation of his grandfather, economic minister in Japan’s Manchurian colony, then Munitions Minister in the wartime cabinet and a post-war PM who resigned under a cloud of financial corruption. Abe has rammed through a Designated Secrets Act (at the behest of the US) that has numerous loopholes that could be used to justify the imprisonment of political opponents. He also supports revision of Japanese textbooks to obscure the nature of Japan’s aggression in the 1930s and 1940s. Prof. Stiglitz’s visits to Japan where he meets Abe and with the cream of the pro-Government establishment, as well as columns such as this one, lend support to the Abe regime. Attempts to engage Prof. Stiglitz on this topic, though, have proved futile. As our current President is wont to say: Sad. But this time, no irony intended.

The fact that Japan has gone further for longer on fiscal stimulus and that monetary policy has attempted to accommodate fiscal deficits, and the results of that policy has been an "epic fail" should make us question why we would want to do the same in the U.S.? The latest Japanese policy has been to attempt a "balanced budget multiplier" by raising both government spending and taxes to pay for the incremental spending. Perhaps the Japanese policy technocrats should consider reducing the sales tax by a significant amount and let the public spend their increased take home pay as they see fit.

Professor Stiglitz has a good grasp of the big picture in Japan. Everything he says makes sense. Could PS perhaps ask someone in its group of economists to write a similar essay about how to fix the US economy, something as brief and with the same plain language?

Good points, and also be careful about over-optimising to a narrow set of metrics. In Japanese culture, full employment is a goal, including finding things for older people to do to provide fulfilment and a sense of being useful in the community. These considerations are as important as GDP or productivity, but may not be captured by simple rationalist metrics.

Same for agriculture. The production of rice is a culturally significant activity because of its effect on the countryside, on communities, and the way of life. It's also a strategic concern where self-sufficiency in rice is worth much more than the marginal benefit of importing it. Japanese policy makers know these things, but may not voice them so readily.

Abe's policies 'to integrate women into the economy's have so far been a lot of talk but very little real action. He has asked corporations to hire, promote more women but done nothing with tax policy to incentivize them to do this. He has not instructed the ministries in the government do do this. He has not even put more women into his own Cabinet.

After more than 3 years in office he has, finally, talked about boosting the number of daycare programs so young married women with small children can go back to work. How long will it take for this to happen, however?

Abe has not done anything to reduce the tax benefits for married women NOT to work. The marriage deduction should be reduced. Otherwise, it pays married women more to stay home than it does to go to work.

He has done nothing about equalizing pay for women. They are still working disproportionately at so called part time, temporary employment where they make much lower salaries.

I am really amazed that even economists of renown, and Stiglitz is certainly one, do not understand what Government Debt actually is. It is not a debt that needs to be repaid from any outside source. It is a debt that can simply be reversed by central bank option of returning the debt sums back to the investors when the debts mature. The debt is deposits from investors stored in the fed accounts and receive interest on them at 6 monthly intervals. It is analogous to your savings account - a bank debt but a depositors asset.
No way is it a debt that has to be paid back by future generations. Absolutely no way! No federal government would spend this money - they simply create their own as required. AND even for the past payments on welfare etc, no one is paying for them now and no one ever did.
The ignorance is astonishing!!!

Stiglitz :
""Alternatively, the government could exchange the debt for non-interest bearing money – the long-feared monetization of government debt. Even if monetary finance was more likely to boost inflation than the exchange of debt for interest-bearing perpetuities, this is hardly an argument against it: it is only an argument for going more slowly. ""
So, what is this? A peek out from behind the INET recognition of Chairman Turner's "Overt Money Finanace", so as to advance a modicum of real-economy demand in order to close the GDP - gap.

But, not even a sentence on how (under what authority and what transactions?).

So, somehow we are to understand that the government is transacting its negative (debt) balance and achieving a positive (equity) balance.

The only way I know to do that is to follow a Plan like that researched as a Sovereign Money System (SMS) by KPMG in Iceland.
http://internationalmoneyreform.org/blog/2016/09/kpmg-iceland-report-sovereign-money/

KPMG relied heavily on the research of Japanese Monetary Economist Dr. Kaoru Yamaguchi.
http://monetary.org/wp-content/uploads/2011/11/DesignOpenMacro.pdf

The annual number of mergers and acquisitions is more than twice what it was in the 1990s. The world needs a healthy dose of competition to keep today’s giants on their toes and to give those in their shadow a chance to grow.
But concentration is at its most worrying in America. The share of GDP generated by America’s 100 biggest companies rose from about 33% in 1994 to 46% in 2013. The five largest banks account for 45% of banking assets, up from 25% in 2000
Why has no one called to task the Federal Reserve, for creating an environment with its low interest policy that is encouraging this behavior?
The whole Fed program is deceptive. It is robbing from the poor fixed income investor to make certain big banks make a profit and big corporations can create monopolies and then increase prices for the” caught in the middle”. Why are the elite economist not taking the FED to task for its harmful policies?

Japan seems to be s symbol of astute planning and execution, instead of being termed as a laggard. In fact Japan has done the best in terms of output growth with a shrinking workforce, something that no other nation could achieve.

Why would a country need to grow if the worker population is shrinking? It is just that banks have a way of blowing the problem out of proportion; it is their problem that if their assets do not grow, they have a staggering liability to deal with.
Or is it just that bubbles need the fodder of growth in income perpetually?

Japan's population is shrinking due to the many retirees who make up a comparatively large percentage of the population.

Over time, this affects the economy.

Debt per person, increases.
Falling domestic demand.
Lower domestic growth.
And while Debt-to-GDP may stay the same, it becomes less sustainable as the economy contracts.

Either Japan needs to admit millions of immigrants (which it won't do, this is a matter of historical fact) or it needs to dramatically increase exports, or the government needs to find some other revenue-generator that isn't growth-related.

Japan has already hit the top of the export Bell Curve, and there isn't much room for it to grow it's exports, unless it creates an entire new export market that billions will purchase. What's left to invent and export at scale? Flying cars? The Hydrogen Economy? A home battery in every home on the planet? (All these things are almost certain to happen one day, but Japan needs revenue now, and those are not yet growth industries)

1) Therefore, a large carbon tax, as per Joseph's essay, which could fund government operations *and* the switch to cleaner energy, is one altruistic way to replace diminishing Japanese government revenues. (But after that conversion is complete, then what?)

2) Another way, as I have suggested (please see my comment below) is for Japan to legislate a 40-50% inheritance tax, which would float Japanese government spending for perhaps the next 20 years -- at which point, large revenue accumulations based on the inheritance tax will no longer exist as people adjust to passing on their inheritance to their heirs while they're still alive. (So then what?)

How else to allow continued Japanese government spending at the same high levels as today, as government revenue continues to fall in the face of shrinking population/falling demand/plateaued exports?

It is a conundrum to be sure.

Were I running Japan, I'd plow billions into R&D (cutting other spending, if necessary) and institute a $40/tonne carbon tax, and institute a 40% inheritance tax. Without any delay.

Japan’s GDP grew during its “lost decades” from ¥415 trillion in 1990 to ¥503 trillion in 2010. This growth was achieved even though the number of workers in 1990 was 65.6 million, which peaked at 67.4 million in 1997 and subsequently started to shrink to 62.8 million by 2010.

More taxes and regulations won't increase investment. If anything Japan should incentivize labor saving technologies that will generate revenue streams in necessary industries, like elderly health care. There's certainly global demand in developed countries, and the additional benefits of reducing the need for low skilled migrant emigration will have a positive effect in terms of preserving resources and social stability. Europe doesn't need more people, it needs better efficiency. Japan could provide thought and technological leadership in this area while addressing it's own problems.

Here’s an example. Cyberdyne is a Japanese start-up company that grew out of Professor Yoshiyuki Sankai’s research in the University of Tsukuba. The company is marketing a device that is able to provide extra muscle power for people who are unable to walk unassisted. Perhaps one might describe it as a kind of robotic limb. The company is testing this robotic limb in Japanese hospitals. When fitted to a user’s leg, the robotic limb senses the wearers’ intentions and moves in perfect synchrony with the user’s limb. Surely, this is going to be a boon to millions of people who have difficulty walking?

You can read the full text of why Japan is poised for an economic renaissance here:

Joseph Stiglitz starts with two good paragraphs, and then in his third paragraph he goes into the ditch. The prime thing we know about any tax, such as a carbon tax, is that you get less of what you tax. The Japanese are already a quite carbon-efficient economy, and they have much less opportunity to benefit from 'green' investment. The second mistake Mr. Stiglitz makes is to assume that 'green investment' WILL occur and that it will massively benefit the Japanese economy. It is just as likely to be another "boat anchor".

Note the default wave sea 40 to 50 years and oil price shock starting the 1980 one. It could be the Japanese would be well placed investing in green and LNG etc so as to ward of a monster default wave on the global monster debt should the next oil price shock come. PS else it could get ugly ugly ugly on the bond markets.

Zero Perpetuals sounds like a great proposition, PROVIDED.
A. They are interventions that finance Public Infrastructure Assets
B. The Obligor must have perpetual life - The State.
C. Redemption Funds must be built with cashflows derived from Assets created.
D. Cashflows can be derived from Asset use or from Privatizations.
E. The Sectors must be specified and part of a designed architecture.

General purpose balance of payments type of licenses for Zero Perpetuals must be eschewed.
Because political abuse is a guarantee for perpetual debasement of currency.

The second suggestion is THE PRINTING PRESS.
Political abuse renders this option meaningless.

Political abuse is inflicting unemployment on people over an obviously crappy misunderstanding of oil shocks like the NAIRU. Make the government the employer of last resort, there is your buffer stock. It's much easier to transition jobs then get hired from being unemployed. People would be more financially secure knowing they had a fall back. Print money all day long to finance it cause its the only thing that will get us out of stagnation.

Japan is the illustration of the consequences on the obsession for efficiency. The moment Japan went the way of lean production and disregarded the connection to consumers and innovation, Japan lost the current hedge.
Cost isn’t a competitive advantage in most of the tradable goods today. The ability to innovate on the other side is proving to be a game changer both for firms and countries. In an economy that is able to generate an absurd amount of cash, what’s the point of focusing your efforts in making more cash on the short –run.

Japan is a fascinating situation and it's difficult to argue against the success of postwar Japan. But Japan could be so much more -- not only in GDP growth and debt reduction -- by increasing the living standards of Japan's citizens.

Broadening-out the economy by adding millions of female workers, will add more discretionary income to families, thereby boosting the contribution to Japan's GDP growth among the bottom four quintiles.

A large carbon tax might be neutral or even better, in that the healthcare costs associated with fossil fuel burning are larger than any purported gains from cheap energy.

The Epstein study by Harvard Medicine informs us that in the United States, coal alone causes up to $500 billion worth of damage annually to the American economy via increased healthcare spending, premature deaths, and infrastructure damage.

Non-coal fossil fuels must have a similar economic cost due to the massive number of vehicles operating in heavily populated regions of the country.

Combining the two costs, it's not difficult to see that each $1 *not spent* at the gas pump *probably* saves $10 in healthcare and infrastructure damage. (Even if it was only a cost savings of 2:1 instead of 10:1 per my above suggestion, it's still a very worthy option, IMHO)

Japan could add a reasonable carbon tax to finance a switch to clean primary energy (electricity and district heating) and to secondary energy (transportation) while creating millions of jobs and adding to R&D spending.

Carbon taxes in the world range anywhere from $15. per tonne of CO2 to the Stanford University claim of $220. per tonne of CO2 emitted.

Why even bother having a $15 per tonne carbon tax -- as it barely pays the administrative costs.

It would be great to have a world standard of $40. per tonne of CO2 -- and have that revenue plowed into cleaner energy -- even if that means burning natural gas instead of coal. Natural gas burns 1 million times cleaner than brown coal (known as Lignite) and ten-thousand times cleaner than pure black coal (which is known as Anthracite)

Burning natural gas instead of Lignite or even Anthracite is a major step forward for nations with large populations and many GigaWatts of energy production through coal-fired power generation.

Because Japan is so advanced they are almost ready for a switch to a Hydrogen economy, today.

And billions of tons of methane ice (Clathrate) sit on the bottom of the world's cold water oceans, slowly dissolving into the water (and then into the atmosphere) and it is free for the taking.

Clathrate is easily turned into pure hydrogen right on board the ships that mine it. (Japan has set up some trial technology to test Clathrate extraction)

All that needs to be done is a small boost to make it economically viable, until those economies of scale kick in.

A moderate carbon tax of $40 per tonne could provide the incentive to put Japan 25 years ahead of the rest of the energy consuming world.

I like the idea of perpetuities in theory, but I worry about them becoming a vehicle for governments to transfer debt and eventually return to the same high Debt-to-GDP levels with no net gain for the economy. In fact, a loss, as that debt must be serviced, and it is money that would get siphoned out of national spending programmes annually. Eternally, is a long time.

After 100% of a government's debt is turned into perpetuities AND it still has a Debt-to-GDP ratio of 248.8% -- then what?

I'd rather see an Inheritance Tax of up to 50% implemented, where the government spends the bulk of it on legislated debt paydown (say at a rate of 5% per year)

Yes, over time the economy will grow and the Debt-to-GDP ratio will fall, thereby lowering the amount the government must pay towards debt paydown each year where growth is recorded. On balance, there are only so many Japanese who are elderly and have substantial wealth tucked away.

If every country legislated a maximum Debt-to-GDP of 50%, then during times of national emergency or war, there is a lot of borrowing opportunity whereby that debt ratio can be ramped-up to 100% of GDP (for example) until such times as the emergency or war is over.

That is responsible economics.

While TPP simply hands responsibility for the PacRim economy, to corporations, which is an abdication of responsibility.

Nothing against corporations here, but they need firm but fair regulation by governments that are nominally controlled by The People.

Corporations cannot be expected to work for the public good, they are in business to make their shareholders wealthy. And good for them! They do a great job of that.

Those entrusted to the public good, are the politicians. We can't allow them to abdicate their responsibilities to us.

See also:

In the first year of his presidency, Donald Trump has consistently sold out the blue-collar, socially conservative whites who brought him to power, while pursuing policies to enrich his fellow plutocrats.

Sooner or later, Trump's core supporters will wake up to this fact, so it is worth asking how far he might go to keep them on his side.

A Saudi prince has been revealed to be the buyer of Leonardo da Vinci's "Salvator Mundi," for which he spent $450.3 million. Had he given the money to the poor, as the subject of the painting instructed another rich man, he could have restored eyesight to nine million people, or enabled 13 million families to grow 50% more food.

While many people believe that technological progress and job destruction are accelerating dramatically, there is no evidence of either trend. In reality, total factor productivity, the best summary measure of the pace of technical change, has been stagnating since 2005 in the US and across the advanced-country world.

The Bollywood film Padmavati has inspired heated debate, hysterical threats of violence, and a ban in four states governed by the ruling Bharatiya Janata Party – all before its release. The tolerance that once accompanied India’s remarkable diversity is wearing thin these days.

The Hungarian government has released the results of its "national consultation" on what it calls the "Soros Plan" to flood the country with Muslim migrants and refugees. But no such plan exists, only a taxpayer-funded propaganda campaign to help a corrupt administration deflect attention from its failure to fulfill Hungarians’ aspirations.

French President Emmanuel Macron wants European leaders to appoint a eurozone finance minister as a way to ensure the single currency's long-term viability. But would it work, and, more fundamentally, is it necessary?

The US decision to recognize Jerusalem as the capital of Israel comes in defiance of overwhelming global opposition. The message is clear: the Trump administration is determined to dictate the Israeli version of peace with the Palestinians, rather than to mediate an equitable agreement between the two sides.